I think I've explained this in another thread, but here it goes again:
Hub: repeats all signals on all ports. Also known as a multi-port repeater. Functions on OSI Layer 1. This creates a larger collision and broadcast domain.
Switch: reads the source and destination MAC (hardware) address, creates an address table (associating a MAC address with a port on the switch), and then creates a virtual circut between the source and destination ports. If the destination MAC address is unknown the switch will forward the packet out all ports. Makes forwarding decisions based on OSI Level 2 information. This creates smaller, and more collision domains, but creates a larger broadcast domain.
Router: commonly used term to describe what is more accurately described as an internet gateway router, or internet sharing box. A true router creates an address table using a special routing protocol, such as open shortest pathway first (OSPF), or internal gateway routing protocol (IGRP). These routers make path determination decisions based on OSI Layer 3 information. This gets into IP addresses, subnets, subnet masks, etc. A true router would be used in a large corporation to create smaller broadcast domains and logically segment networks.
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